Taking personal allowance whilst living overseas

[marcusjames]

I have been living overseas for 12 years and have a nil tax code in UK. Does anyone know if rental income is tax-free, or whether this is capped to the extent of my personal allowance. I assume I am only entitled to claim my normal income personal allowance. If so, is there an issue if I use a UK allowance but then claim overseas domicile against potential CGT on sale?

Thanks.

Edited by marcusjames on Thursday 9th February 20:27

[sumo69]

Income arising in the UK is taxable in the UK - its irrelevant whether you are resident in the UK for tax purposes.

Have you not declared it whilst you have been away for 12 years?

Whether you qualify for a personal allowance to offset against the income is not straight forward - it depends where you are resident/domocile for tax purposes for starters.

David

[jeff m2]

Doesn't Switzerland have a reciprocal tax agreement with UK.?

How it works for me.
I rec money from UK with no tax withheld, I enter on my US tax return and pay US tax on it.

If that money was taxed by the UK, I would still enter it as income on my tax return but I would put the foreign (UK) tax in the foreign tax paid line as a tax credit.

Reciprical tax agreements are to prevent double taxation not agreements for avoidance

With regard to CG on a house, it may be worth reestabilishing it as primary residence if the amount is considerable.

Domocile is tricky, to lose your UK domocility entails severing all links, you have a house there!

Edited by jeff m2 on Friday 10th February 14:46

[dirty boy]

marcusjames said:

I have been living overseas for 12 years and have a nil tax code in UK. Does anyone know if rental income is tax-free, or whether this is capped to the extent of my personal allowance. I assume I am only entitled to claim my normal income personal allowance. If so, is there an issue if I use a UK allowance but then claim overseas domicile against potential CGT on sale?

Thanks.

Edited by marcusjames on Thursday 9th February 20:27

As sumo says, UK derived income is taxable in the UK whatever your resident status.

You've got the issue of your nationality, domicile, do you meet the conditions set out in HMRC6 ?

You may well be entitled to your personal allowances, you may also be able to restrict your UK liability on your rental property to that of a double taxation treaty in existence with your current country of residence. (There are some 'funky' double taxation treaties about, depending on your country of residence, that can mitigage liability to UK tax considerably)

If you are not resident/not ordinarilly resident, there's unlikely to be any liability to UK CG tax unless you return to the UK within 4 years of the gain, but that's just a basic overview.

Worth getting an advisor IMO.

[Eric Mc]

If a UK domicile person is living aboroad and they are receiving rental income from a UK property - the normal procedure is for the rental agent who is collecting the rent on behalf of the overseas resident to deduct tax at source at 20% from the rent. The individual will than be able to offset the UK tax paid against any tax they would have paid on this income in the country in which they DO pay tax - IF there is a Double Taxation Agreement in place between the UK and the other country.

[dirty boy]

Eric Mc said:

If a UK domicile person is living aboroad and they are receiving rental income from a UK property - the normal procedure is for the rental agent who is collecting the rent on behalf of the overseas resident to deduct tax at source at 20% from the rent. The individual will than be able to offset the UK tax paid against any tax they would have paid on this income in the country in which they DO pay tax - IF there is a Double Taxation Agreement in place between the UK and the other country.

Even if there is no letting agent, the tenant also should deduct tax. NRL1 can be submitted though.

It's not straight forward at all, because being resident in another country then renders you (usually) liable to tax on your worldwide income (as it is here) but again, they may have different rules for residence.

You really should be sitting down with someone discussing this, and should have done some planning in anycase.